The Thunder Dan's Corporation's purchases from suppliers in a quarter are equal to 65 percent of the next quarter's forecasted sales.

Your firm has an average collection period of 42 days. Current practice is to factor all receivables immediately at a 4 percent discount. Assume that default is extremely unlikely. What is the effective cost of borrowing?    A.  28.79 percent B.  36.20 percent C.  37.78 percent D.  40.97 percent E.  42.58 percent Number of periods = 365/42 = 8.6905 EAR = {1 + [0.04/(1 - 0.04)]8.6905 - 1 = 42.58 percent

101.

Workout Together has projected the following sales for the coming year:    Sales in the year following this one are projected to be 18 percent greater in each quarter. Assume the firm places orders during each quarter equal to 35 percent of projected sales for the next quarter. How much will the firm pay to its suppliers in Quarter 2 if its accounts payable period is 60 days?    A.  $212.67 B.  $241.33 C.  $291.67 D.  $351.33 E.  $356.67 Q2 payments = (60/90) × 0.35 × $800 + (30/90) × 0.35 × $900 = $291.67

102.

The Thunder Dan's Corporation's purchases from suppliers in a quarter are equal to 65 percent of the next quarter's forecasted sales. The payables period is 60 days. Wages, taxes, and other expenses are 16 percent of sales, and interest and dividends are $60 per quarter. No capital expenditures are planned. Sales for the first quarter of the following year are projected at $720. The projected quarterly sales are:    What is the amount of the total disbursements for Quarter 2?    A.  $564.27 B.  $579.43 C.  $582.15 D.  $585.30 E.  $590.67 Payment of accounts = (60/90) × 0.65 × $660 + (30/90) × 0.65 × $590 = $413.83 Total disbursements = $413.83 + (0.16 × $660) + $60 = $579.43